Last-Minute Public Service Loan Forgiveness Waiver Tips

There are less than two weeks left before the expiration of the Public Service Loan Forgiveness Waiver. And in this we'll make sure you have those last second tips you need to make sure you don't miss out on this once in a lifetime opportunity. Let's get started. Hello, my name is Brenton Harrison, founder of Escape Student Loan Debt, and your host for the Escape Student Loan Debt podcast. A few ago we did an episode not only Public Service Loan Forgiveness, but the Public Service Loan Forgiveness waiver. And in that episode, I said without exaggeration, that I feel like this once in a lifetime opportunity could be life altering for thousands of of people in this country desperate to escape from federal student loan debt. Now in this episode, we're gonna give you some of those last second tips sure you don't miss out on this opportunity. But before we do, let's define what it is in the first place. So as a recap, the Public Service Loan Forgiveness program is a [00:01:00] federal student loan forgiveness program for eligible borrowers who are working non-profits or government entities. Instead of having to pay for or 25 or even 30 years, as is the case with some repayment plans, you can instead pay towards your federal student loans for 10 years and after that 10th year of service while also making payments, you can have entirety of your student loan debt wiped away in full with no tax implications at all. You can simply walk away free clear, regardless of the amount that you've had forgiven. In normal times, there are actually three requirements that you have to have in place for a single payment to count towards your 10 years. The first requirement is that you have to be considered what's called a full-time equivalent employee. You have to be full-time and you to be an employee. You cannot be an independent contractor. The second requirement is that you you have to be paying towards Direct Loans. So for [00:02:00] borrowers who had types loans like Perkins Loans or Stafford Loans, as we covered in episodes, they would not able to have those loans forgiven directly. they did in past years have the option of consolidating those. loans into a new Direct Consolidation Loan, and that new loan would then be eligible for forgiveness. The problem, however, with that process was that in past years, any payment credits you had towards those old ineligible loans was completely wiped away in the consolidation process. . Now the last requirement is that you be paying towards these debts using what's called an Income Driven Repayment plan. . you did not have all three of these requirements in place when you made a payment, the payment simply did not count. Public Service Forgiveness Waiver turned this program on its head by saying that until October 31st, [00:03:00] 2022, they will allow you to count any payment made towards any type of loan with any type of repayment plan towards your 10 year requirement. Since we've released that episode, I've probably had a person a day reach out to me trying to make sure that everything that they have done will be be considered and counted before this deadline expires. And now that we're a couple out, you can probably add another person a day to that total. So we're about to break down some of the things that you're seeing right now. First, let's address how to make sure that your eligible employer is the studentaid.gov system. If you Google Public Service Loan Forgiveness Employment Certification Form, and we put a link to this in the show notes, a PDF will pop up, that PDF will give you instructions on how to fill out the information for any previous employers or current employers you've worked for who you believe are eligible for Public [00:04:00] Service Loan Forgiveness and it will also require that you have an eligible administrator sign off on that form verifying your employment. You can fill it out via paper. You obviously have to get it signed with a wet signature. And the two options that have for submitting are very old school. have Mohela, you have to actually mail in the form or you have to to fax the form in crazy as that sounds. What many people don't know however, is that there is a tool online called the Public Service Loan Forgiveness Help Tool. And with that tool it will walk you through the same process that you would do via the paper form in terms of asking information about your employer. And once you have, verified that FEIN number, you can add that employer to your account help tool. Once you have done so for all of your eligible employers, it prefills that same PSLF document that you you have to [00:05:00] have signed, and you can simply print that form and take it to get signed by the eligible administrator. Now, if you're worried about doing this process before October 31st, and you are planning to do the paper from scratch, you should be concerned because there is a very real possibility that you could mistype or rewrite something that you wouldn't form faxed or mailed in on time and for whatever reason, it wouldn't be accepted before that October 31st deadline. But one of the forms of guidance that the Department of Education has given is that if use the PSLF Tool the Department of Education website, you can add your employers and as long as you've done so before October 31st, you can submit the signed form after October 31st and still receive credit, but you have to make sure those employers are added to your account before that Halloween deadline. So if you are going through this form process and haven't used the [00:06:00] PSLF Help tool, which we will link to in the show notes, I highly encourage you to go and first as step one, add your employers through the PSLF help tool to your online account. Next let's address those who are pursuing Public Service Loan Forgiveness, but have an incorrect loan type. In this case, in order to have your credits counted before the deadline, you have to consolidate loans into a Direct Loan before October 31st. If you are married your spouse has to co-sign that application. When you hit submit on that loan consolidation, you will see that it has been but you'll see a cosign code that's generated. code will aThis codebe to you, and if you have a spouse, that spouse register have not aif theyeady account on aistudentaid.gov will have to enter that cosign code to actually finish the application process. You have seven days [00:07:00] to do this, and spouse not cosign that application within the 7 days, the application is invalid. It is crucially important that if you're doing this before the 31st, that you understand you can do it on the 31st, but if so, you need to make sure that before that seven days expires, that your spouse uses that cosign code to finish the process. If you take care of these one or two steps, on your situation, you will be okay for the Public Service Loan Forgiveness waiver. And after the break, I'll not only give you a more concrete timeline for when you can see these efforts off. also tell you the few people out there who shouldn't consolidate before October 31st. Before the break, we talked about the second step of this Public Service Loan Forgiveness waiver process, that step being consolidating your loans if you had ineligible loan types. But there are also people out who are consolidating for a great reason. That [00:08:00] reason being that another form of aid given in this waiver is that if you consolidate loans and some of those loans are older than others, you will get the number of credits that are applicable for the the oldest in that consolidation process for the entirety of your loans. An example would be if I have one loan that I took out three years ago, but I consolidated the loan I took out 11 years ago, my newly consolidated loan would have 11 years of credit. That's a very enticing reason to consolidate, but there are some scenarios where you should avoid doing so. I've said now that as a part of this consolidation process, you have to sure that you're signing up for an Driven Repayment plan. An element of those plans is that they base that payment off of what you make, and they find out you make by accessing your most recently filed tax return. That process requires them to ask for you [00:09:00] to update your pay every single year. The payment freeze that was initiated as a result of the pandemic, however, came at a really weird time in terms of your student loan servicer accessing your most recently file tax return. The payment freeze started in March, 2020, which is a really unique time it comes before the typical April tax filing deadline. And as a result, there were a number of student loan borrowers out there who had their payments frozen at a time where that amount was based off of their 2018 tax return. That was four years ago, and when payments resume in January of 2023, they will start again at the amount you were paying before the payment freezes. So you may be one of the people listening to this, when payments restart, you'll be paying an amount based on income you earned four years ago. And hopefully four years you were making substantially [00:10:00] less than you are now. Another benefit to this payment freeze is that student loan servicers will not ask you to recalculate your income again until after July 1st, 2023. You see a part of these Income Driven Repayment plans is not only that they ask you to update your income year, but that they do so at the same time each year. You have a payment Ann anniversary, and on that date your loan servicer asked you to give new information so they can calculate your payment for the ensuing 12 months. Now if you don't have to update your pay before July of 2023, what about people whose payment anniversaries come before July in a given year? These people will not have to update their loan information and loan payments until that same month in 2024. So, If I have a payment that is based off of [00:11:00] what I made in 2018 and my loan payment anniversary is in February or March or April, any date July 1st, that means that I will will continue to pay based off of my income four years ago until my anniversary comes in 2024. I can get six years worth juice out of this squeeze. Let's assume that I I have the right types of student loans. I have Direct Loans already. I don't have to consolidate in order to make my loan the right type of loan, and I am making more money now than I was 2018. I would be punished by consolidating my student loans before the 31st, a of that process is verifying my income during the application. So, I would possibly have my payment change and increased a year or more before it had to. If you're wondering how to find out on which date your anniversary falls for your student loan [00:12:00] plan, you can access this information by into studentaid.gov. you so, it pull up a dashboard that gives an overview of the entirety of your student loan debt. In the top right corner, you'll see a a section that says, my aid Data. And if do so, you can scroll through that document and you will see your current loan. And under that section it will show you your payment plan description, which will show you the payment plan that you had prior to the payment freeze. It will tell you when the last payment is that you made. It will tell you the amounts of that last payment. It will tell you the upcoming payment you have to make in terms of that date and this document that we're looking on at. this document that we're looking at on screen, you can actually see that payment freeze reflected because it says that the next payment date isn't due until January 30th, 2023. You will also see a section that says loan repayment plan [00:13:00] IDR Plan date. This date is the date your loan servicer typically will reach out to verify your income. In this sample file that we are viewing together, you can see that this person already has a direct consolidated loan, and this loan's IDR plan anniversary date is May 27th, 2023. It comes before July 1st, so that means that this person is having a payment that's based off of their 2018 income. Because their payment plan anniversary comes before. July 1st of next year, they won't have to update payment until their anniversary comes around in 2024. They have all of these things in place, it would penalize them for consolidating their loans now because if they do, they will have to submit their income verification and now their payment will based on what is likely their 2021 tax return, which may reflect a significantly higher [00:14:00] income amount. So you've done all of these things. You've submitted the forms, submitted your employers, you've consolidated your loans if necessary, and now you're wondering when they're going to update your Public Service Loan Forgiveness credit. Well, let me tell you, you're gonna have to patient for various reasons. The first is when they're applying credit. They're going to go through not the Public Service Loan Forgiveness Waiver rules, but first the traditional Public Service Loan Forgiveness rules, and might be denied in that process. Then they will go through the rules of what's called the Temporary Expanded Public Service Loan Forgiveness Rules, and you may be denied some that process, and then will apply the rules the Public Service Loan Forgiveness Waiver. this process months before you see those credits applied. And we are also seeing some people who had credits in past or had loans with other servicers who in the consolidation [00:15:00] process are logging in and seeing that their student loan balance their old servicer now zero. But they do not yet have an account with Mohela. So They're worrying that loan has somehow become lost, and maybe they have had their previous credits wiped away. Your credit has been wiped away and your loan has not been lost, hope that it had been. It's simply part of the process of Mohela out to your old loan servicer, off your balance there, and transferring that debt so be patient in waiting for your credit, but do not be patient in making sure that you get all of this information taken care of before the deadline, and we'll keep giving you information in advance of that date to make sure that anyone who has credits that can be counted, will be counted, and they'll be that much closer to having their student loans forgiven, reduced, reorganized, or expedited.